Buy KNR Constructions, target price Rs 350: HDFC Securities

HDFC Securities has buy call on KNR Constructions with a target price of Rs 350. The current market price of KNR Constructions is Rs 257.35. Time period given by analyst is one year when KNR Constructions Ltd. price can reach defined target.

KNR Constructions Ltd., incorporated in the year 1995, is a Mid Cap company (having a market cap of Rs 7291.01 Crore) operating in Infrastructure sector.

KNR Constructions Ltd. key Products/Revenue Segments include Income From Contracts and Other Operating Revenue for the year ending 31-Mar-2021.


Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 1121.91 Crore, up 29.93 % from last quarter Total Income of Rs 863.46 Crore and up 12.14 % from last year same quarter Total Income of Rs 1000.44 Crore. Company reported net profit after tax of Rs 139.71 Crore in latest quarter.

Investment Rationale
KNR delivered a strong quarter, with revenue/EBITDA/APAT of INR 10.1/2.1/1.1bn beating estimates by 16/19/20%. It has given FY23 revenue guidance of INR 35bn, with EBITDA margin pegged at 15-17%. The NWC days stood at 63 (vs. 82 as of Mar-21). During the quarter, the income tax department carried out a search operation at KNR’s various business premises. There has been no formal communication from the department until date. Management is of the view that this will not have any impact on the company’s financial position. Hence, no provision is made for any liability arising thereby in the company’s financial statements. THe brokerage maintains BUY with a reduced TP of INR 350/sh (18x Mar-24E EPS, HAM 1x P/BV). It has revised FY23/FY24 EPS estimates downwards by 5.8/7% to factor in the impact of higher commodities prices on margins.

Promoter/FII Holdings
Promoters held 51.48 per cent stake in the company as of 31-Mar-2022, while FIIs owned 5.4 per cent, DIIs 33.48 per cent.